What should a CEO make?

[jwasbury]

Originally Posted by Tidybuoy

However, if I had a say in things, I would cap the payroll deduction on income taxes to no more than $100,000 per any individual employee. I do not think that the government (us) should be subsidizing million dollar salaries.

You surely realize that what employers deduct in taxable compensation, the recipients are taxed on that compensation, right? This is an illustration of a broad concept know as the "tax benefit rule" in play. One taxpayer's deduction is another taxpayer's income, and vice versa. The effective rate of taxation on the multi-million dollar executive's W-2 income is currently higher than the Corporate rate, so this trade should work to the benefit of the Govt.

[Tidybuoy]

I understand that the $mil dollar salary is a $mil dollar deduction for the corporation, and then the $mil salary is taxes at a higher W-2 tax rate.

My only point here is that CEO salaries have outpaced worker salaries by a huge ratio and it seems (to me) that this should be a little more equitable. I don't think we can impose salary rates on a free society so my recommendation is to only allow the company a limited tax deduction. In the example above, the company would only be allowed a $100k deduction vs the current $1mil deduction but the CEO will still have to pay tax on the full $1mil.

[Tobra]

How much should they make?


As much as someone is willing to pay them, just like anyone else.

[Gretch]

Stock prices reflect expected forward cash flow. Having the government suck more taxes out of the same financial construct will reduce stock prices and thus capital gains taxes. Likely also reduce dividends as that is what public companies do with excess cash.

So there is a partial broader financial picture of the intricacies of this subject.

As to the governance aspect, public companies are owned by "the public" IE investors. A high % of those shares are owned by professional investor firms, mutual funds, pension funds, endowment funds, etc They do vote their shares and the directors feel those votes. The annual proxy has the board members certifying as to the reasonableness of the CEO compensation, and the Board members stand for re election every 3 years.

To think that public company board rooms are the regulation free environments of the 1920's is naive.

[jwasbury]

Originally Posted by Tidybuoy

In the example above, the company would only be allowed a $100k deduction vs the current $1mil deduction but the CEO will still have to pay tax on the full $1mil.

Which is effectively double taxation. I appreciate the concern around the pay gap, though I don't agree that a solution to this phenomenon can be reverse engineered through tax policy. More likely, such a tax policy would result in those high paying CEO jobs moving out of this country.

[1990C4S]

You either ban greed in all forms or you live with the results.

Why would anyone care what a CEO, or for that matter a professional athlete, makes?

Don't like their pay structure? Don't give them your business. Don't buy their stock. Don't go to the stadium.

If executive compensation was a serious issue the stock market would reflect it. The reality is that 'excessive' compensation is the norm now, it won't change any time soon.

[93nav]

I thought there already was a limit to how much a CEO's salary (and probably other high level officers) could be deducted as an expense. Possibly $1m. That is why so much of CEO compensation is in the form of stock options etc. McGuire made the vast majority of his money because of the stock price of UHC. Unintended consequences are a b!tch.

As far as the removing the cap on SS taxes, you do realize that the more you pay in, the more you get out. See my comment above about unintended consequences.

Originally Posted by Tidybuoy

I think a company should have the right to pay it's management anything it pleases.

However, if I had a say in things, I would cap the payroll deduction on income taxes to no more than $100,000 per any individual employee. I do not think that the government (us) should be subsidizing million dollar salaries. I also think that the social security deduction for both employee and employer should not have a cap. If you make a lot of money, you simply have to contribute more to the fund.

[kach22i]

Originally Posted by seafeye

We’ve all heard that in the 60’s a typical CEO made about 5 times more than the average employee. Today that number is about 250-350 times.

I can do the math and I know that if I took my CEO’s salary and divided it up equally between each employee, it would only equal $250.

In 40 years is the salary of a typical CEO going to be 500-1000 times that of an average employee? Will that be reasonable? When is enough, enough? Should a CEO make more in one day than an employee does all year?
Should a leaders salary be based on share price? Profits? Revenue?

I only ask because my CEO is making a killing and managers are getting huge bonuses all the while we are losing revenue and market share. All profits are going to stock buybacks, not buying new machinery.

https://www.vox.com/2018/8/15/17683022/elizabeth-warren-accountable-capitalism-corporations

The shareholder value era has pretty clearly brought about an explosion in inequality in the United States. It succeeded, for starters, in greatly increasing the value of shares of stock in the English-speaking countries where Friedman’s doctrine has been most influential.

You can see this in the evolution of a ratio known as Tobin’s Q — the value of all the shares of stock outstanding divided by the book value of everything publicly traded companies own. .................

Warren’s plan is not like that. If imposing stakeholder responsibilities on businesses and requiring many of the seats at the biggest firms to be elected by workers pushed the S&P 500’s Q ratio down to German levels (which is probably a high estimate since German codetermination rules are somewhat tougher than her proposal), share prices could fall by 25 percent. For the vast majority of people who earn the majority of their income by working for wages, cheaper stock would be offset by higher pay and more rights at work.

But for billionaires with huge stock holdings — and for CEOs with compensation packages tied to share price performance — it would be a disaster. If they thought the idea stood a snowball’s chance in hell of happening, rich people would denounce it to anyone who would listen — and since executives and major investors enjoy privileged access to the media, their denunciations would be heard....................

Studies from Germany’s experience with codetermination indicate that it leads to less short-termism in corporate decision-making and much higher levels of pay equality, while other studies demonstrate positive results on productivity and innovation.

It's hard to talk about a topic like this without it getting political.

[jwasbury]

^I feel like we were pretty a-political so far.

But my curiosity was sparked about this "Codetermination" concept, so I used the Google, and found this:

Codetermination and equality

Finally, as the system of codetermination is also mentioned in the context of “democratic capitalism” and is meant to be an inclusive framework, it seems natural to wonder whether this also shows up in numbers. For obvious reasons, macroeconomic effects are hard to measure seriously. Nevertheless, Vitols (2005) looks at 25 EU countries and finds that countries with stronger worker participation rights perform better in terms of labor productivity, R&D intensity, and had lower strike rates, although this group of countries performed worse in terms of GDP growth. Hörisch (2012) looks at the association between codetermination and income inequality (measured using the Gini index) in OECD countries and finds that it is negative – i.e. higher income equality in countries with codetermination.

LinkCodetermination in Germany – a role model for the UK and the US? | Bruegel

[Por_sha911]

Originally Posted by GH85Carrera

Instead I started a business so I can pay more in taxes.

No you started a business because you love doing it.

[cabmandone]

Originally Posted by Por_sha911

Decisions.
Everything else is none of your business. He or she earns whatever they negotiated and we shouldn't be haters because they may make more than us.

Did the former CEO of GM "earn what they negotiated"? If so, where do I sign up to get a job where I can destroy the company and still end up a multi millionaire? I'm all in. I don't hate them because they make more than workers do. I dislike them because their piss poor decisions directly effect what workers make. CEO pay isn't based truly on their performance.. but how well it appears the company is performing.

[cabmandone]

Originally Posted by 1990C4S

If executive compensation was a serious issue the stock market would reflect it. The reality is that 'excessive' compensation is the norm now, it won't change any time soon.

The stock market doesn't give a rats ass what a CEO or the workers make. The stock market cares about profitability.

[red-beard]

Originally Posted by seafeye

We’ve all heard that in the 60’s a typical CEO made about 5 times more than the average employee. Today that number is about 250-350 times.

I'd like to see a source for this. And it seems like you are focused only on the salary and only on the largest corporations.

MANY smaller corporations, the CEO barely makes any salary, only the company profits at the end of the year, if there are any.

[p911dad]

I recall reading an article on this subject a while ago that basically said that CEOs in similar industries of the same relative size, etc. were compensated similarly, ie, giant banks to giant banks. The boards of directors are in competition for top talent and the compensation scales up or down accordingly. I'm sure this is just one factor but just like teams compete to crazy levels for the best talent, companies to some degree do the same

[wdfifteen]

Originally Posted by Tidybuoy

I think a company should have the right to pay it's management anything it pleases.

However, if I had a say in things, I would cap the payroll deduction on income taxes to no more than $100,000 per any individual employee. I do not think that the government (us) should be subsidizing million dollar salaries. I also think that the social security deduction for both employee and employer should not have a cap. If you make a lot of money, you simply have to contribute more to the fund.

That actually makes sense. Thanks Vern

[Bill Douglas]

Originally Posted by cabmando

The stock market doesn't give a rats ass what a CEO or the workers make. The stock market cares about profitability.

And a heartbeat after some CEO moron makes a bad decision it's reflected in the stock price.

[Tervuren]

Originally Posted by Bill Douglas

And a heartbeat after some CEO moron makes a bad decision it's reflected in the stock price.

And if a CEO is making bank from increasing stock prices from stock options, that means significant loss of potential income if the CEO makes a bad decision.

[KFC911]

Originally Posted by Tervuren

And if a CEO is making bank from increasing stock prices from stock options, that means significant loss of potential income if the CEO makes a bad decision.

I'm sorry, but my real world experiences inside of the pac man banking daze of corporate b$ and then with RJR/Nabisco leads me to my perspective.

I am NOT a bitter peon....retired at 48 from the huge corporate fustercluck....back in '08....no regrets about my career...none.

Life is good...is greed?

[1990C4S]

Originally Posted by cabmando

The stock market doesn't give a rats ass what a CEO or the workers make. The stock market cares about profitability.

That's my point. The compensation is nothing in the big picture.

[KFC911]

Originally Posted by Bill Douglas

And a heartbeat after some CEO moron makes a bad decision it's reflected in the stock price.

Nope...doesn't work that way AT ALL...based upon experience . That said....Ken Lewis took home 96 million in 2006, BOA stock was approx. $80 per share. My Wachovia stock is worth .....thank you taxpayers for makin' the top few filthy $$$
...

It's good work, if you can get it....

Ken don't give a $chit what the price is....and at least a dozen more I can name that destroyed profitable entities....I lived it on the "bigger fish" side...greed at the top ....jmho and MMDV .